Hospitality industry attacks UK government over tax ruling

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FRESH calls have been made by the hospitality sector for continued government support as its recovery from the pandemic is threatened by the worsening cost of living crisis.

Tim Martin, founder and chairman of pubs giant JD Wetherspoon, has attacked the UK government for pushing ahead with plans to cut the rate of value added tax applied to the industry to 20% from April 1.

The VAT rate applied to hotels had been reduced to 5% in 2020 to support pubs, hotels and restaurants which had seen trade wiped out due to lockdown in the early months of the pandemic. It remained at 5% until it was raised by the Treasury to 12.5% ​​on September 30, and is now on the verge of being restored to 20%.

Hospitality campaigners have consistently argued that VAT should remain at 12.5% ​​to help the industry compete in the face of rising costs, including soaring fuel bills and high wage inflation caused by a severe shortage of staff since Brexit.

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Mr Martin, whose company has 70 pubs in Scotland, yesterday criticized the impending VAT hike, saying the policy was damaging the vitality of the city and town centre. He argues that it is unfair that food is subject to a 20% VAT rate when sold in pubs, restaurants and cafes while food sold in supermarkets is exempt from the tax.

Mr Martin said: ‘Pubs, restaurants and cafes are an integral part of shopping streets, while supermarkets are often found on the outskirts of town or out of town. Privileging supermarkets over pubs is bad for high streets and town centres. It is also an accepted principle of taxation that it should be fair and equitable, treating businesses that sell similar products equally. Tax discrimination creates economic distortions. Supermarkets have clearly used their favorable tax treatment to subsidize the price of beer, wine and spirits over the past few decades.

“Pubs, restaurants and cafes play an important role in the social fabric of the nation, while generating jobs and large amounts of tax for the treasury. The hospitality industry understands that governments need taxes, but there should be a sensible rebalancing, so that all businesses selling similar products are treated the same.

Responding to comments, the Scottish Licensed Trade Association said the UK government should look to other countries in Europe such as France where VAT is lower for hospitality as part of a strategy to boost investment and employment in hotels and restaurants, while promoting the wider tourism industry. .

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SLTA spokesman Paul Waterson said: “I think everyone can agree that hospitality has been devastated by this, and we need all the help we can get to trying to stabilize businesses, many of which haven’t opened at all. [since lockdown] and many of whom are [only] part of the week. We need all the help we can get to get back on our feet. With all the staffing issues we have, prices going up, etc., the government really needs to consider us an outlier.

Mr Waterson added that hospitality figures such as Mr Martin “should push for a differential” between the level of charges applied to alcohol sales in pubs and the charges collected in supermarkets. The SLTA argues that lowering fees in pubs, effectively giving licensees the right to claim a rebate, while increasing it in door-to-door commerce would spur the hospitality sector’s recovery from the pandemic, citing research of the Social Market Foundation that such a decision would be “revenue neutral” to the Treasury.

Mr Waterson said: ‘We would like to keep the VAT rate where it is or keep it low, and also ask the government to look at this duty differential and the thoughts of the Social Market Foundation on this. It is certainly a debate worth having. In all respects, Covid has accelerated these types of ideas.

“We are really in a bad position. It’s certainly not back to normal, or close to it. »

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